Is the economy taking off?

By: John Carlo Tria

A PIECE of news not so widely read was the self rated poverty survey of the Social Weather Stations, which some argue is more accurate than governments own poverty statistics. The number improved further to 38% from the previous period, marking an all time low.

When we join this with the lower poverty figure in the first half of 2018 at 21%, we see a trend of reduced poverty numbers. Our only hope is that it improves fat enough.

When we combine this with lower unemployment in 2018, it looks like growth is finally reaching the poorer sectors, allowing them to participate in the economy and redistribute and regenerate wealth, especially in the countryside.

What remains to be done is to continue bolstering manufacturing and agriculture, which are significant job generating sectors. Agriculture is also a key sector that will ensure lower costs of living and keep wages and other costs competitive. When food is cheap, the cost of living and labor costs tend to stay stable. This will allow those with jobs to generate more income and savings, building a multiplier effect for the economy.

Over all, these are thumbs up for the economy. We hope the trend continues.

Moving forward, it is clear that tax reforms allowed more revenue to be generated, which will help us manage the need to borrow more given that as a middle income country, interest rates are not as low as they are for low income states.

This is why tax reforms were vital to sustaining our growth. Without an increased capability to collect taxes, we will be unable to negotiate for better loan terms to finance our ambitious and necessary infrastructure build up.

Eventually, we hope to lower our debt-to-GDP ratios further to 36%, a very good number when compared with our ASEAN neighbors. But we also learned that we have a higher balance of payments surplus, which means we as a country earned more from a wide range of economic activities.

A lot has been said about the rising current account deficit.  By definition, it means more money is being spent than earned by the country as a whole. This includes the trade deficit, where a country imports more than it exports.

This simply means that we as a country are importing more goods needed to drive local economic activity, thus spending and investing more in our economy, and yet earned more in the process. Knowing that we do not possess all the elements to push our manufacturing, hence the higher importations of inputs.

Generally speaking a current account deficit is not exactly a bad thing while your growth and debt-to-GDP ratios keep improving, and the balance of payments surplus all means that you are able to pay the debts being incurred.

What this means is that we are no longer a basket case. The international finance community has taken cognizance of our capabilities and finds us more bankable, even than neighbor Indonesia, as far as a our credit ratings are concerned, as we have finally arrived at BBB+ according to Standard and Poors, bringing us to the level of Thailand.

These to me are signs of economic growth bearing the important fruit of improving people’s lives. Whichever side of the political fence you may be on, it is still something to celebrate, and push harder for.

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